Understand In-House Financing

As a convenient option to using other lenders like banks or credit unions, some dealerships around South Los Angeles offer prospective car buyers in-house financing. If you’re ready to look for a car, it’s important to know your financing options. 

But, what does in-house financing mean, and is it a better choice than other financing options? We’ll reveal the truth about this type of financing, including what it is, the differences between this financing method and others, and more.

What Is In-House Financing?

In-house financing also known as dealer financing or a buy here pay here (BHPH) loan. Instead of borrowing money directly from a credit union or bank the dealership is the lienholder in charge of the financing, secured by your vehicle. If you have trouble making the payments for some reason, the dealership has the right to repossess the car.

It’s much easier to qualify for this type of alternative financing than through traditional methods like bank loans. However, if you default on payments, it will hurt your credit rating. You’ll make regular payments like you would with any car loan, and the interest is applied to the principal. Consider a trade-in and apply the value to your overall loan.

How To Get Financed for a Car

Now that you know the basics of in-house financing, let’s go over how and why dealer financing is different and how to get approved for a car loan. Most lenders let your credit history and rating impact your loan approval. Getting in-house financing through a dealership is more flexible for many borrowers with low or no credit, making obtaining a car loan much easier. A Hawthorne Auto Square car loan can also help with credit building to improve your credit score as you start to make payments. 

When you apply for and secure a loan from a dealership, it’s much faster than with a bank. Getting vehicle financing from a dealership usually allows buyers to drive away much sooner, sometimes days ahead of schedule. Even “high-risk” applicants find our pre-approval and in-house financing process much easier at dealerships that offer low or bad credit financing. 

The Pros and Cons of Getting In-House Financing for a Car

As with any type of loan, there are pros and cons associated with in-house financing from your dealership in Compton rather than a third-party lender. 

Pros:

• Flexibility: The application and approval process is faster and may include other perks like flexible interest rates and extended warranties to protect your investment.
• Get a car you can afford: Dealerships with in-house financing options often process the information before bringing you to the showroom. You’ll already have a loan approved when you start shopping, so you’ll only look at vehicles that fit your budget. Some incentives may even be thrown in during the process.
• Easier qualification process: With in-house financing, people with fair to poor credit have more options, making the qualification process easier. You can also agree on payment plans that work for you. Although a low interest rate isn’t guaranteed, you can still try to refinance the loan later and get a lower rate as long as you make monthly payments on time and in full. 
• Build up your credit: Getting installment loans like in-house financing from a car dealership may help boost your credit score over time. Some customers see their numbers increase after around a month or two. When your credit score improves, it’s easier to obtain other forms of credit in the future, like a mortgage loan or approval for a rental property.
• You might not need a down payment: Some in-house financing dealerships don’t require a down payment to purchase a vehicle. This puts more money in your pocket and makes the buying process less stressful. 

Cons

There are also some drawbacks to getting in-house financing, including:

• Higher interest rates: Most in-house financed loans have high interest rates when compared to traditional lenders. Additionally, used car interest rates are always higher than rates for new, no matter where you obtain the financing.

• You’re limited to used vehicles: A buy here pay here dealership offering second chance financing usually only sells used vehicles. Therefore, if you’re looking for a brand-new vehicle, you’d likely need to get financed via traditional means. 
• It may not boost your credit: Dealerships that don’t review your credit history may not report your monthly payments to the “big three” credit bureaus. This means making payments on time won’t positively affect your credit score. 

Get Financing for Used Cars in Hawthorne Today

The Hawthorne Auto Square team has in-house financing programs available for you in the Los Angeles area. We accept disability, Social Security, government assistance, and many other forms of income. With our aggressive financing options, you can get into the used car you want quickly. Our Buy Here Pay Here policy includes low interest rates, and you can take five months to build up your down payment. Contact us today to find out more, or feel free to drop by our dealership in person. 

Frequently Asked Questions

Who is in-house financing good for?

In-house financing is good for car buyers with low or no credit or for buyers with income from unconventional sources like disability, Social Security, or government assistance. It’s also good for those without a prior credit history. 

How are monthly payments calculated?

Monthly payments are typically calculated by dividing the total loan amount by the loan term or the total number of months of the loan. The interest rate is added to the principal balance each month to cover both principal and interest, resulting in the final monthly payment.

What are the loan terms and repayment options?

Your loan terms (interest rate and length of the loan) will vary based on your unique situation and how much money you borrow. You’ll make payments to Hawthorne Auto directly by mail, phone, or online.

Can I pay off my loan early? Are there any penalties?

Prepayment and early loan payoff penalties vary by state. In California, any amount less than 20% of the original principal amount may be prepaid in any 12-month period without penalties.